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Let’s Talk Broadband Fund: The CRTC’s New Initiative

In Telecom Regulatory Policy CRTC 2016-496 ("TRP 2016-496") issued by the Canadian Radio-television and Telecommunications Commission on December 21, 2016, the Commission set out its vision on providing Canadians with access to affordable, high-quality modern telecommunications services[1]. The Commission established a universal service objective for telecommunications that extends to both voice services and broadband Internet access services, and indicated that it would establish a mechanism to fund access to broadband Internet access services (the "Broadband Fund"). This article explains what we know at present about the Broadband Fund.

The Broadband Fund will be established using the powers of the Commission under section 46.5 of the Telecommunications Act that (i) allow the Commission to require any telecommunications service provider ("TSP") to contribute to a fund to support continuing access by Canadians to basic telecommunications services, (ii) require the Commission to designate a person to administer the fund, and (iii) allow the Commission to regulate the operations and fees of the administrator.

The Commission has already established a fund under section 46.5 – the National Contribution Fund – that is used to subsidize the provision of (i) local voice services in high-cost serving areas, and (ii) video relay services. TRP 2016-496 states that the current local voice services subsidy regime will be phased out, and this will be the subject of a follow-up proceeding to be commenced in early 2017.

The details of the new Broadband Fund will also be determined under a follow-up proceeding to be initiated in early 2017. (The proceeding had not yet been initiated as of the date of publication of this article in March 2017.) The Vice-Chairman, Telecommunications of the Commission has stated recently that it will take at least one or two years before the Broadband Fund is in operation.

In the interim, TRP 2016-496 offers some guidance on features we can expect to see when the Broadband Fund is established.

The Broadband Fund will provide only a modest amount of money to subsidize broadband infrastructure. The Commission acknowledges that billions of dollars will be required to address current gaps in Canada in access to broadband Internet services. Yet, the Broadband Fund will distribute no more than $100 million in its first year and will grow by $25 million to a cap of $200 million by the fifth year. This results in total funding over the first five years of $750 million.

The Broadband Fund will be funded ultimately by Canadian consumers of telecommunications services. Contributions to the fund will be based on a percentage of contribution-eligible revenues of TSPs. This is the same approach that is used for the National Contribution Fund. However, with the new fund, retail Internet access and texting revenues will no longer be exempt from contribution. With a broader revenue base and a larger fund (the National Contribution Fund distributes about $100 million per year), the Commission expects that the revenue-percent charge for the Broadband Fund will be approximately the same as the current rate, which is 0.63 per cent.

The Broadband Fund will be used to subsidize proposals from applicants to build or upgrade access and transport infrastructure to improve broadband Internet access in underserved areas. Underserved areas will be those in which available fixed broadband Internet access services do not (i) allow speeds of at least 50 MBps download and 10 MBps upload, (ii) offer the option of unlimited data allowance, or (iii) meet quality of service metrics to be developed by a CRTC-sponsored working group within six months of the date of TRP 2016-496.

Distribution of subsidies from the Broadband Fund will be based on a competitive process. Applicants must demonstrate that they have secured support from government or community entities or from non-profit organizations. They must also demonstrate the applicant's own investment in the proposal. Applicants must demonstrate that the proposal would not be viable without support from the Broadband Fund. Up to 10 per cent of the subsidies in each year will be reserved for proposals to establish or improve broadband Internet service in satellite-reliant communities.

The administration of the Broadband Fund will be the responsibility of a third-party administrator appointed by the Commission. The administrator will perform a project management function: administering the application process, screening and assessing applications, managing funding agreements, conducting activities relating to accountability, and reporting results. The Commission has stated that this administrator must be independent of any recipients of grants from the Broadband Fund.

The Commission will appoint a fairness monitor to observe the competitive process and ensure that the project management function is administered in a fair, open and transparent manner.

TSPs, potential applicants for subsidies from the Broadband Fund and all persons with an interest in the Commission's new universal service objective will likely wish to participate in, or monitor, the follow-up proceeding on the CRTC's new Broadband Fund.

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